A panel cointegration rank test with structural breaks and cross-sectional dependence

Publikation: Beiträge in SammelwerkenAufsätze in KonferenzbändenForschung

Authors

This paper proposes a new likelihood-based panel cointegration rank test which allows for a linear time trend with heterogeneous breaks and cross sectional dependence. It is based on a novel modification of the inverse normal method which combines the p-values of the individual likelihood-ratio trace statistics of Trenkler et al. (2007). We call this new test a correlation augmented inverse normal (CAIN) test. It infers the unknown correlation between the probits of the individual p-values from an estimate of the average absolute correlation between the VAR processes' innovations, which is readily observable in practice. A Monte Carlo study demonstrates that this simple test is robust to various degrees of cross-sectional dependence generated by common factors. It has better size and power properties than other meta-analytic tests in panels with dimensions typically encountered in macroeconometric analysis.
OriginalspracheEnglisch
TitelJahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel : Session: Time Series Econometrics, No. D01-V3
Anzahl der Seiten27
VerlagZBW - Leibniz Informationszentrum Wirtschaft
Erscheinungsdatum08.2016
PublikationsstatusErschienen - 08.2016
VeranstaltungJahrestagung des Vereins für Socialpolitik - VfS 2016
: Demographischer Wandel
- Augsburg, Deutschland
Dauer: 04.09.201607.09.2016
https://www.socialpolitik.de/De/jahrestagung-2016
https://www.socialpolitik.de/De/jahrestagung-2016

Zugehörige Projekte

  • Likelihood - Basierte Panelkointegrationsmethodik und Ihre Anwendung in Makroökonomik und Finanzmaktanalyse (Likelihood II)

    Projekt: Forschung

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